(FORTUNE Magazine) – When a monster like Katrina strikes, insurers often turn to Risk Management Solutions, a Newark, Calif., consultant that projects the harm from hurricanes,
earthquakes, and other calamities. We called RMS research chief Robert Muir-Wood, based in London, to get some perspective on New Orleans--and what we should worry about now.

What stands out about Katrina?

Katrina was what we call a "super-catastrophe"--beyond the scale of hurricanes we've seen over the past decade, even Andrew. What characterizes super-catastrophes is a cascade in
which protective systems are taken down, allowing second or third catastrophic events to take off. In this respect, Katrina was like the 1906 San Francisco earthquake. That disaster
triggered fires that started off quite small. But people were unable to control them because of all the disruption from the initial event, and the fires took off and destroyed about
half of the city.

What are the main recovery challenges?

Most catastrophes happen over fairly short periods of time; then people pick up the pieces and get on with their lives. But Katrina is different. As long as the floodwaters are still
there, the catastrophe is still going on. Floods are the most dismal of all catastrophes. All sorts of health problems follow them. It's likely they're going to discover that after
the basic cleanup is complete in New Orleans, the level of toxic contaminants remains higher than previously approved limits. So a decision is going to have to be made. Are they going
to strip the topsoil off the whole area, which would be extremely costly, or are they going to bend the rules on toxic-exposure limits?

What about rebuilding New Orleans?

It comes down to what kind of protection a city expects and is willing to pay for. It will take a long time and much money to improve levees in New Orleans to afford significantly
better protection against flooding. Until that happens, the insurance rates charged by the private market are likely to be very high. That could pose a challenge to the rebuilding
process.

What's the biggest risk we face now?

Probably the scariest one is a pandemic influenza outbreak. People tend to think that the threat is simply about getting ill and the fatalities that would follow. But in reality, if
you had a pandemic of a particularly virulent flu, it would paralyze society. Would you go to work if you knew an outbreak were raging in your city? Would you send your children to
school?

Flu is a bit like terrorism. After the recent London bombings, a lot of people avoided taking the tube because of what I call the "nameless-dread effect." Personally, I chose to
continue traveling on the tube. But if there was a pandemic of a highly infectious and potentially lethal flu, I wouldn't go--I'd stay at home. A lot of similar reactions would occur,
so food would stop arriving at the supermarket, airline travel would dry up, and so on. The costs would be absolutely huge, and I don't think anyone has fully come to grips with it
yet.